Under The Microscope
National CFO Survey: Increased Optimism On U.S. Economy, Hiring
CHICAGO-There is growing optimism about the U.S. economy, as 48% say it will improve over the next six months (up from 30% six months earlier).s
That is one finding of a national survey of U.S. chief financial officers (CFOs) and senior comptrollers conducted by Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd.
However, concern is growing regarding inflation, as 50% say their company intends to raise prices for its goods, up from 31% six months earlier and 24% one year ago.
While still tepid, 39% intend to increase head count (up from 28% six months earlier), and 54% are optimistic about their own company over the next six months (up from 46%).
Grant Thornton LLP conducted the biannual national survey from March 22 through April 6, 2011, with 318 U.S. CFOs and senior comptrollers participating.
For info: www.grantthorton.com
Auto Dealer Financing Markups Cost Buyers Extra $25.8 Billion In Interest
DURHAM, N.C.-Consumers who financed a car through a dealership in 2009 will pay more than $25.8 billion in extra interest over the lives of their loans because of dealer interest rate markups, according to new research by the Center for Responsible Lending.
The dealer interest rate markup is an increase of 24% from 2007, the firm said. CRL also found that undisclosed markups increase the odds that a subprime borrower will default by 12% and odds that he or she will end up having their car repossessed by 33%.
The report, "Under the Hood: Auto Loan Interest Rate Hikes Inflate Consumer Costs and Loan Losses," examines the opaque world of hidden rate markups, the interest rate car dealers can add to car loans beyond the rate consumers qualify for based on their credit history. Auto dealers claim that markups are compensation for their work in arranging financing, but this suggests they are billing car buyers $952 to $1,587 per hour for this service.
CRL's report also finds that dealers are more likely to charge higher markups to consumers with weaker credit compared to those with better credit. Loans made in connection with finance companies that focus on subprime borrowers may have an additional undisclosed 5% kickback included by the dealer.
"Even for consumers who financed a vehicle through a dealer with a self-imposed cap of 2.5% on hidden markups," said CRL research analyst Devlin Davis. "The added interest on that loan can be nearly $1,700 for a new vehicle and over $1,200 for a used one."
For info: www.responsiblelending.org
TMG Releases White Paper On Future Of Card Rewards Programs
DES MOINES, Iowa-Community-based financial institutions are cautioned against making rewards "a sacrifice to the interchange gods" in a new white paper authored by TMG's card rewards expert, Ivy Sprague.
Instead, Sprague suggests, rewards should be considered among the few card program components untouched by legislation.
"The Credit CARD Act and proposed debit interchange regulations may be making the job [of card portfolio management] more difficult, but methods for program optimization still exist," writes Sprague. "Among these methods, rewards programs can have one of the most dramatic impacts on performance."
Sprague said TMG's rewards-issuing clients have realized benefits, including the conversion of inactive cardholders into fully engaged ones. She also discusses new types of reward programs like mobile and merchant-funded rewards.
"An effective rewards program can't be created in a vacuum," warns Sprague, emphasizing the importance of first understanding what cardholders want from a rewards program.
For info: The white paper, "Still in Control-Look Past Regulations to See the Optimizing Power of Rewards," can be downloaded at www.themembersgroup.com/PRrewards
Javelin: Study Suggests Opportunity Can Be Found In Prepaid Cards
SAN FRANCISCO-Recent economic upheaval and new banking regulations have created increasing opportunities for the growth of prepaid cards, according to Javelin Strategy Research.
A report issued by the consultancy, "2011 Prepaid Cards and Products: Expanding and Innovating for Mass Market Appeal" said this confluence of regulatory and economic factors has caused many consumers to no longer be eligible for some forms of payment. Further, regulations such as the Durbin Amendment, the CARD Act of 2009, and Regulation E are limiting or have the potential to limit the revenue collected from traditional payment options, encouraging a shift in direct deposit account (DDA) economics and making conventional bank accounts more expensive for consumers.
Javelin analyzed the underbanked, currently estimated as one out of six people, to create successful outreach to this expanding segment that will benefit from the growing number of reloadable and multi-functional prepaid products in the market as access to conventional DDAs is curtailed.
Both FIs and non-banks can supplement their traditional account services, using prepaid as a tool to help consumers establish financial services access and move toward more mainstream financial relationships.
Javelin said underbanked consumers are active prepaid transactors, making nearly twice as many monthly payments using a prepaid card as do other consumers.
For info: www.javelinstrategy.com